* Oil up on news of Libyan air strike near oil terminal
* Gold climbs to record above $1,440 an ounce
* MSCI world equity index off 0.2 pct
* U.S. stocks gain on Fed's view, bonds drop
(Updates with U.S. market closes)
By Caroline Valetkevitch
NEW YORK, March 2 (Reuters) - Brent crude oil prices rose
on Wednesday as news of an airstrike in Libya near an oil
terminal spurred supply worries, while investors' flight to
safety drove gold to a record high.
World stocks dipped, while Wall Street stocks advanced.
U.S. economic data, including a Federal Reserve report saying
the U.S. economy has slowly gained strength this year, helped
to offset worries that higher oil prices will dampen growth.
Oil prices jumped to approach 2-1/2-year highs on news that
airstrikes hit Brega about 1.2 miles (about 2 kilometers) from
a Libyan oil terminal, after Libyan leader Muammar Gaddafi
launched land and air offensives to retake territory in Libya's
eastern region.
Investors are worried that political instability could
spread to major oil producer Saudi Arabia, a central U.S. ally
in the region, and other oil suppliers.
"The (stock) market is slowly adjusting to the new
environment (of high oil prices) and beginning to realize that
there is no short-term solution to this, that we are going to
live with this uncertainty for a some time," said Robert Lutts,
chief investment officer at Cabot Money Management in Salem,
Massachusetts.
At its intraday peak, Brent crude for April delivery traded
at $117.81 a barrel. For details, see []
Gold <XAU=> climbed to an all-time record at $1,440.10 an
ounce. The metal has rallied 10 percent since late January when
tensions first began to flare in the Middle East and Africa.
The MSCI world equity index <.MIWD00000PUS> dipped 0.2
percent and was off about 2 percent from a 30-month peak set in
February. The index is still up about 3.5 percent since the
start of the year.
U.S. stocks rose after the Fed's Beige Book showed the U.S.
economy was slowly gaining strength in 2011. The Fed noted that
manufacturers and retailers had been able to increase some of
their prices. []
Data showed U.S. private-sector employers added more jobs
than expected last month, which investors saw as a positive
sign ahead of the more closely watched U.S. government's
monthly jobs report, due on Friday.
The Dow Jones industrial average <> rose 8.78 points,
or 0.07 percent, to settle at 12,066.80. The Standard & Poor's
500 Index <.SPX> gained 2.11 points, or 0.16 percent, to end at
1,308.44. The Nasdaq Composite Index <> advanced 10.66
points, or 0.39 percent, to settle at 2,748.07.
The day's rally was broad, with eight out of 10 S&P 500
sectors ending higher. Sectors sensitive to energy gained,
including industrials <>, up 0.4 percent, and materials
<.GSPS>, up 0.2 percent. An index representing the S&P
infotechnology sector <.GSPT> rose 0.5 percent.
DANCE OF OIL, DOLLAR AND STOCKS
As investors made their flight-to-safety bids, the dollar
fell to a record low against the Swiss franc. U.S. Treasury
debt prices declined.
"There is still a lot of risk aversion. I think the big
focus right now is what's going on with the Middle East, North
Africa and oil," said Igor Cashyn, interest rate strategist at
Morgan Stanley in New York.
Equities have had a strong inverse relationship with oil in
the past several weeks on concerns that rising prices could
slow economic growth.
For a graph of equities correlation to oil, see
http://r.reuters.com/mut38r
"There is an increasingly strong correlation between
equities and oil," said John Brady, senior vice president at MF
Global in Chicago.
The FTSEurofirst 300 index <> of top European shares
slid 0.7 percent to close at 1,153.73 on fears that
skyrocketing oil prices could drastically curb or halt growth.
SAUDI ARABIA ON OUR MINDS
Forces loyal to Muammar Gaddafi launched a major offensive
against rebels in eastern Libya, sparking a rebel warning that
foreign military help might be needed to "put the nail in his
coffin" and end Gaddafi's long rule. []
Saudi Arabia's stock markets declined for a 13th session
and hit a 22-month low, while Dubai equities fell to a
6-1/2-year low, reflecting investors' worries over planned
protests in Saudi Arabia.
Saudi Arabia's benchmark stock index <.TASI> fell nearly 4
percent at one point to a fresh 22-month low.
Brent crude for April delivery <LCOc1> rose 93 cents to
settle at $116.35 a barrel on Wednesday -- the highest
settlement since Aug. 21, 2008.
U.S. crude for April delivery <CLc1> jumped $2.60 to settle
on Wednesday at $102.23 a barrel, the highest since front-month
crude ended at $106.89 on Sept. 26, 2008.
EYES ON EUROPEAN RATES AND U.S. JOBS
The Swiss franc soared to a record high versus the dollar
<CHF=EBS>.
The euro <EUR=EBS> climbed as high as $1.3890 on trading
platform EBS, its strongest level since Nov. 9, with investors
looking ahead to the European Central Bank's policy-setting
meeting on Thursday. The expectation is growing that interest
rates will rise in Europe before doing so in the United
States.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 21/32, its yield at 3.47 percent, up from 3.40 percent on
Tuesday. The economic news helped to overshadow turmoil in
oil-producing regions.
Economists polled by Reuters forecast Friday's nonfarm
payrolls report for February will show a rise in private-
sector payrolls of 190,000 and a rise of 185,000 in overall
nonfarm payrolls.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
INSTANTVIEW-ADP Feb payrolls rise []
ADP vs. the U.S. Labor Department:
http://r.reuters.com/gut38r
US planned layoffs:
http://r.reuters.com/fut38r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting and writing by Caroline Valetkevitch; Additional
reporting by Angela Moon, Karen Brettell and Wanfeng Zhou;
Editing by Jan Paschal)
